| 来源类型 | Working Paper
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| 规范类型 | 报告
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| DOI | 10.3386/w17064
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| 来源ID | Working Paper 17064
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| Recursive Contracts, Lotteries and Weakly Concave Pareto Sets |
| Harold L. Cole; Felix Kubler
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| 发表日期 | 2011-05-20
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| 出版年 | 2011
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| 语种 | 英语
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| 摘要 | Marcet and Marimon (1994, revised 1998, revised 2011) developed a recursive saddle point method which can be used to solve dynamic contracting problems that include participation, enforcement and incentive constraints. Their method uses a recursive multiplier to capture implicit prior promises to the agent(s) that were made in order to satisfy earlier instances of these constraints. As a result, their method relies on the invertibility of the derivative of the Pareto frontier and cannot be applied to problems for which this frontier is not strictly concave. In this paper we show how one can extend their method to a weakly concave Pareto frontier by expanding the state space to include the realizations of an end of period lottery over the extreme points of a flat region of the Pareto frontier. With this expansion the basic insight of Marcet and Marimon goes through - one can make the problem recursive in the Lagrangian multiplier which yields significant computational advantages over the conventional approach of using utility as the state variable. The case of a weakly concave Pareto frontier arises naturally in applications where the principal's choice set is not convex but where randomization is possible. |
| 主题 | Microeconomics
; Mathematical Tools
; Economics of Information
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| URL | https://www.nber.org/papers/w17064
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| 来源智库 | National Bureau of Economic Research (United States)
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| 引用统计 |
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| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/574739
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推荐引用方式
GB/T 7714 |
Harold L. Cole,Felix Kubler. Recursive Contracts, Lotteries and Weakly Concave Pareto Sets. 2011.
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文件名：
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w17064.pdf
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格式：
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Adobe PDF
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